What Happens If Your Main Contractor Goes into Administration? A Subcontractor’s Guide to Protecting Against Insolvency Losses
Are you protected against contractors going into insolvency? Since 2024, the number of construction companies going into administration is fairly alarming. Now more than ever insolvency cover is a must for contractors.
Although the market did show signs of recovery, construction firms accounted for 17% of all insolvencies in the UK in July 2026.
In June 2026, Ardmore Construction Group, a London contractor turning over more than £340m a year, collapsed into administration, leading to the shutdown of major sites overnight and is expected to impact up to 500 staff members.
If you’re a subcontractor, that’s not a distant headline. It’s the exact scenario that decides whether your business survives a bad quarter or folds with it.
This guide explores what happens when your main contractor goes into administration, whether you’re liable for anything as a result, and what you can put in place now, before it happens to you. A contractor’s insolvency doesn’t have to become your problem.
What Main Contractor Insolvency Means for You
When a main contractor goes into administration, an insolvency practitioner takes control of the business to work out whether it can be rescued, sold or wound down. For subcontractors, that moment triggers a few things at once:
- Work stops: sites typically close at once while administrators evaluate the situation.
- Payments freeze: any invoice you’ve submitted but haven’t been paid for joins a queue of creditor claims.
- Retentions become vulnerable: money the main contractor was holding back from you (often 3–5% of your contract value, released at practical completion) is usually lost in a contractor insolvency, because retentions aren’t ring-fenced in a separate account.
- You become an unsecured creditor: unless you hold a bond, guarantee or specific insurance, you’re placed alongside every other trade and supplier that is owed money.
In the Ardmore case, the creditor schedule listed 226 separate claims. Subcontractors and other trade creditors were grouped together, competing for recovery estimated at anywhere from roughly £546,500 and £1.57m against assets tied up in debtors, retentions and work in progress. This is only a fraction of what was owed.
Are You Liable for the Work of Subcontractors?
If you’re a main or principal contractor and one of your subcontractors goes under or their work turns out to be defective, whether you are liable or not depends on your contract and the law, not just on who physically did the work. Here are a few other cases where you would be held liable:
- If you have a non-delegable duty of care (common in construction, especially for structural or safety-critical elements), you can remain liable to your client for the standard of work even if a subcontractor carried it out.
- Your public and professional liability insurance will usually expect the subcontractor to claim on their own policy first. If that subcontractor is uninsured, has disappeared, or has gone into administration, the claim typically lands back on you.
This is precisely why insurers increasingly ask whether every subcontractor on a job holds their own valid insurance – because if they don’t, the risk simply moves up the chain.
Do Subcontractors Need Their Own Insurance?
Yes, and not just to satisfy a main contractor’s tender requirements.
Your own cover is what determines whether you can absorb a shock, rather than being entirely dependent on someone else’s solvency or someone else’s insurer paying out.
At a bare minimum, most subcontractors working on UK construction projects should hold:
- Public liability insurance: it covers claims from third parties (including the main contractor or client) for injury or property damage caused by your work.
- Contractors all risk Insurance (CAR): It covers essential contract works and plant, like materials, tools, and ongoing work-in-progress on site.
- Professional indemnity insurance: is relevant if you provide design, specification, or advice as part of your service.
- Contractor insolvency cover: a distinct product, and the one most subcontractors overlook, because it’s not designed to protect against your mistakes. It’s designed to protect against someone else’s collapse.
What Insolvency Cover Actually Does
Contractor insolvency cover (sometimes bundled into contract works or trade credit insurance) is built specifically for the scenario above: your main contractor, the business you have no control over, goes into administration owing you money.
Depending on the policy, it can help with:
- Unpaid invoices for work already completed and certified
- Retention monies that would otherwise sit in the administration process for months or years, if they’re recovered at all
- Costs of remobilising to secure plant, materials, or site access if a project stalls mid-build
- Cash flow protection while you wait on a statement of affairs and any eventual creditor dividend, which can take a long time and pay out.
Without this kind of cover, your only route to recovery is the standard insolvency process: submitting a claim, waiting for administrators to establish what’s recoverable, and accepting the dividend when it is eventually paid to unsecured creditors – often years after the work was done.
How to Protect Your Business Against Contractor Insolvency in the UK
You can’t control whether a contractor you’re working with goes into administration, but you can control how exposed you are when it happens. Here are a few simple steps you can take in advance to protect your business from contractor insolvency:
1.Check contractor financial health before you sign
Credit checks and Companies House filings won’t catch everything, but they flag deteriorating turnover, rising losses, or repeated late filings. You can check these well in advance to make sure you’re going into business with a stable company.
2. Negotiate shorter payment terms and stage payments
The less money you leave unpaid at any one time, the less your risk exposure is if a contractor stops trading tomorrow. When a contractor collapses, unsecured creditors, including subcontractors and clients holding advance payments are last in line to receive their payment. They often recover only a fraction of what they’re owed, sometimes nothing at all. The single biggest lever you have to limit this risk is to refuse to allow large sums of payments to build up. One way to do this is to push for a payment term of 30 days or less instead of 60 or 90 days. The shorter the gap is between work done and payment made, the less exposure you carry.
3. Push for retentions held in a ring-fenced account
Retentions exist to protect you. A percentage of each payment (often between 3-5%) is withheld until defects are fixed and the project reaches practical completion or the end of the defects liability period.
That money is waiting to be released. Generally, most retention money isn’t ring-fenced at all. It is held in the paying party’s general working capital, indistinguishable from any other cash on their balance sheet.
This matters once a contractor becomes insolvent. If retention money isn’t held separately, it’s just another unsecured claim in the administration, and subcontractors and clients alike often recover a fraction of it. If it’s ring-fenced in a designated trust account, it stays protected and payable regardless of what happens to the paying party’s wider finances.
4. Get insolvency cover in place before you need it
Like any insurance, insolvency cover shouldn’t be secured after a contractor starts showing signs that it is headed toward insolvency. The earlier it’s in place, the more protection it gives you.
5. Maintain an organised paper trail
Keep an organised record of signed cover documents, certified valuations and any documentation of works completed. This paper trail strengthens your position as a creditor if the worst happens.
How to Secure Insolvency Cover with Compariqo
It’s clear that contractor insolvency isn’t rare in the UK construction industry. The risk exposure is high if you don’t do your research well in advance and have the right cover in the place. Following the outlined steps in this guide can save you money and time.
With insolvency cover in place your business is equipped to navigate and overcome contractor insolvencies like the Ardmore case.
At Compariqo, we provide Contractor Insolvency Cover that safeguards your project in the event that a contractor goes into administration.
In the case of an insolvency, our cover will ensure the bond provider pays the reasonable cost (to an agreed sum) in relation to the contractor price to complete the construction work – winning you peace of mind. Our cover offers:
- Customised coverage tailored to your specific project needs
- Swift, same-day quote turnaround
- Flexible rated or unrated cover options depending on the level of protection your project needs
- Dedicated expert guidance every step of the way
- A data-driven underwriting approach
Get a personalised quote directly from us to see how this cover can apply to your project. Secure more than insurance. Secure your peace of mind.